Insights

On January 23, 2025, the Luxembourg Parliament adopted the Bill of Law 8053, which modernizes the law of August 10, 1915, on Luxembourg commercial companies (the “1915 Law”) and the law of December 19, 2002, on the register of commerce and companies and the accounting and annual accounts of companies (the “2002 Law”), by transposing Directive (EU) 2019/2121 of November 27, 2019, as regards cross-border conversions, mergers and divisions (the “Mobility Directive”) into Luxembourg law, introducing a harmonized legal framework for cross-border conversions, mergers, and divisions.

The Mobility Directive, designed to enhance corporate mobility while ensuring legal certainty and stakeholder protection, brings substantial innovations. It introduces EU cross-border conversions, allowing companies to migrate across EU Member States while preserving legal continuity, and EU cross-border divisions. The Mobility Directive harmonises the existing rules for cross-border mergers. Although the provisions of the Mobility Directive are, in general, stricter than those applicable in Luxembourg, the scope of application of the stricter provisions is limited in Luxembourg to cross-border mergers, conversions, and divisions within the European Economic Area (the “EEA”).

There are now two different regimes:

• General regime applicable to domestic mergers, conversions and divisions, and the ones relating to a company outside the EEA; and
• Specific regime applicable to mergers, conversions, and divisions between a Luxembourg SA, SARL or SCA and a company within the EEA, which include the stricter provisions.

I. General regime

The general regime is applicable to non-EEA cross-border transactions and domestic transactions. The transposition of the Mobility Directive into Luxembourg law provides for minor changes to the current provisions of the general regime applicable to conversions, mergers, and divisions.

• The rules applicable to non-EEA cross-border mergers and divisions and domestic ones are aligned.
• Simplified provisions for the mergers by absorption made without any share exchange where one company absorb one or more other companies by owning directly or indirectly all the shares of such target companies, or when the shareholders hold the same proportion of securities in all the merging entities.
• The common draft terms of the relevant transaction (the “CDTs”) relating to a merger, conversion, or division may be amended by the shareholders of the relevant companies and restrict the approval of the transaction with any suspensive provision or condition.
• No independent expert report for companies with one single shareholder.

II. Specific regime for EEA cross-border mergers, conversions and divisions:

The specific regime does not apply to UCITS and EEA companies under liquidation, resolution measures or safeguard procedures.

• EEA cross-border mergers are mergers of a Luxembourg SA, SARL or SCA, being the acquiring entity of the disappearing one, that merges with an EEA company. It includes mergers by formation of a new company, mergers by absorption, simplified mergers between sister companies and upstream simplified mergers;
• EEA cross-border conversions are conversions of Luxembourg SA, SARL or SCA converting into an EEA company, or an EEA company converts into a Luxembourg SA, SARL, or SCA; and
• EEA cross-border divisions are divisions of a Luxembourg SA, SARL or SCA, splitting off their assets and liabilities to an EEA company recently established, or such an EEA company that splits off its assets and liabilities to a Luxembourg SA, SARL, or SCA. It includes partial divisions, spin-offs, divisions by separation, and full divisions.

Common draft terms, board reports and related notice

The boards of all companies involved in an EEA cross-border transaction must draft the CDTs, which include outlining the particulars and relevant information for the shareholders, boards, employees, and creditors of the companies involved.

The CDTs and the cross-border board reports must be communicated electronically to the shareholders and employees at least six (6) weeks before the approval of the EEA cross-border transaction by the general meeting of the shareholders.

The boards shall issue the cross-border report (containing two sections) or two separate cross-border reports to the shareholders and employees, where applicable, explaining and justifying the legal and economic aspects of the cross-border transaction and its implications for future business.

• The first section of the report should include remedies available to them, especially information about their newly introduced exit right and information regarding the implications of the cross-border transaction for them. The shareholders may agree to waive the report.
• The second section for employees should explain the implications of the cross-border transaction on employment relationships and any material changes to be made to the current/existing conditions of employment.

An independent expert examines and issues a report on the CDTs and the cash compensation unless such report is waived by all shareholders.

The Luxembourg SA, SARL, or SCA must publish the CDTs with the RCS at least one (1) month before the relevant general meeting approving the EEA cross-border transaction, as well as a notice for the shareholders, employee representatives, and creditors. The notice informs the shareholders, employees, and creditors that they can submit their comments and remarks on the CDTs. They may submit their remarks and comments about the CDTs at least five (5) working days before the date of such a general meeting. At least one (1) month before the relevant general meeting, the CDTs must be available at the registered office of the companies, as well as the cross-border board report(s), independent report(s), annual financial accounts for the last three years and management reports, and interim accounts (when relevant) to the shareholders.

General meeting, cash-out rights, and legality control.

• No earlier than (1) month following the publication of the CDTs with the RESA, each general meeting of the companies involved in the cross-border transaction resolve on it, and decide to authorize, adjust, or decline it.
• The opposing minority shareholders holding voting shares may exercise their non-suspensive rights for cash-out during such general meeting and must notify the notary of their will to obtain a cash-out redemption with the transfer of their shares to the participating companies, other shareholders, or agreed third parties. The opposing minority shareholders may request an additional compensation in cash during a one-month period after the approval by a general meeting before the chamber of the Tribunal d’Arrondissement in charge of commercial matters. The payment of the compensation must be made in cash to the opposing minority shareholders a maximum of two (2) months after the cross-border transaction is successful and completed. Shareholders who either did not exercise or do not possess the cash-out right, and subsequently receive shares in the new company as part of the EEA cross-border transaction, may challenge the exchange ratio.
• The legality control has two levels.
  • When Luxembourg is the departing country of the cross-border transaction, the Luxembourg notary has three months from the receipt of the CDTs, reports and other required documentation to assess compliance with Luxembourg law. The notary will either issue a pre-operation certificate, benefit from an additional three-month period to assess the compliance with Luxembourg and whether there are abusive, fraudulent, or criminal purposes, or refuse to issue the pre-operation certificate. Upon issuance of such a certificate by the Luxembourg notary, it is transmitted to the EEA country of destination through the Business Register Interconnection System.
  • When Luxembourg is the destination country of the cross-border transaction, the Luxembourg notary must scrutinize the compliance of the part of the cross-border transaction that is subject to Luxembourg law with Luxembourg law, and verifies that the company resulting from the cross-border transaction complies with Luxembourg law in relation to inter alia incorporation, registration, and worker participation when applicable. Then, the Luxembourg notary may accept the pre-operation certificate issued in the departing EEA country attesting the first level of legality control to confirm the completion of the cross-border transaction.

Protection of the creditors

The CDTs must include the guarantees and safeguards proposed by the companies involved in a cross-border transaction to their creditors, and the latter may present their observations at least five working days before the general meeting on the cross-border transaction without any suspensive right on the transaction.

Within three (3) months following the filing of the CDTs with the RESA, creditors with claims preceding such a publication and which are not yet due can demonstrate that the cross-border transaction prevents their claim recovery and that the CDTs are not sufficient. This challenge by creditors does not have a suspensive effect. They may apply for adequate safeguards to the chamber of the Tribunal d’Arrondissement dealing with commercial matters within such a three-month period.

Protection of workers

The board report(s) of the involved companies must include a specific section explaining the results and consequences of the cross-border transaction on employment relationships, retention measures, condition changes, and location changes unless such companies have no employees or the employees are all part of the management body of such companies.

Employees or the employee representatives may also provide their comments and remarks on the CDTs at least five (5) working days before the related general meeting. Their observations do not have any suspensive effects on the cross-border transaction. The provisions governing the participation of employees in the management bodies of the involved companies are the ones applicable in the registered office of destination, (the location after the completion and effectiveness of the cross-border transaction) provided that the destination EEA country provides for equivalent protection.

Entry into force:

The changes made to the 1915 Law and the 2002 Law will be applicable on the fourth day after the publication of the amending law in the Luxembourg Official Journal. The new rules will apply to all EEA cross-border transactions where the CDTs are published during or after the month following the applicable date of the amending law.